The Need To Be Right – Common Psychological Traps For Stock Traders....!

WORDS OF WISDOM FOR THE DAY : 

 

My experience tells me one of the biggest issues traders have is the ever present 'Need to be right'. 

Some thoughts on what characterizes great and successful traders:

• Great traders graciously accept losses. They don't need to be right all the time.
• Great traders focus on proper execution not on the outcome of a single trade.
• Great traders concentrate on good risk management. They constantly manage their open positions.
• Great traders are emotionally detached. Single trades do not affect their mood.
• Great traders don't compare themselves to others. They isolate themselves from the opinions of others.
• Great traders are not afraid to buy high and sell low.

As you probably know by now the single biggest mistake a trader can make is to hold on to a losing position. Failing to cut losses quickly and letting them develop into huge losses is mentally and financially devastating. The underlying psychology which is responsible for this behavior is the 'need to be right' and the fear to sell at a loss. What aggravates the situation is adding to a losing position.

 

Do more of the things that work and less of the things that don't. Isolate yourself from the opinions of other people. Make trading decisions your own. Focus on proper execution. Have the courage to do the right thing because it is right. The most important rule of trading is to play good defense, not great offense.